Property has long been seen as a safe investment. Over the last 20-30 years, many investors have seen astonishing returns by playing the long game. And, although there have been a few major blips – the global financial crisis of 2008, for example – real estate is one of the most stable places to put your money. But what types of property investment exist, and which is best suited to the average investor? Let’s take a look and find out more.
Buy-to-let investors will purchase a property and rent it out to tenants. In essence, you act as a landlord to the people who rent out your home, flat, or apartment, and you can make short term rental income that covers your mortgage payments and maintenance costs. In general terms, you can expect mid to long-term returns, and as long as you ensure your property is always full and generating rental income, the investment should at the very least pay for itself.
Commercial property investment is similar to buying to it, except you are renting out space to businesses. You might offer a property to retailers, leisure companies, and restaurants, office based businesses or industrial companies, for example. If you go down this route, you will need a basic understanding of commercial lease law, and a lot of capital to invest in the vast majority of cases. Bear in mind that commercial property is a highly specialized area, and most investors in this field have a lot of experience.
Off plan/off market
Off plan or of market property investment can give you huge returns in the short term. In essence, you are buying a property that hasn’t yet been built, and because there is slightly more risk, you often find that new builds are cheaper than completed homes and buildings. You can also benefit from bulk purchases, and some investors ‘flip’ their contracts, too – selling on to another party before completion.
Crowdfunding is a new arrival to the property investment scene. Equity crowdfunding is where a group of people pool investments funds and hand them over to a management company who looks after the deal. In general, equity crowd funders gain returns from rental incomes in the short-term, and capital gains in the longer term. There is bridging finance crowdfunding, too. This investment technique involves putting money into short-term buy-to-let loans, which gives you returns on the interest accrued on the loan repayment.
Purchasing land can be a little riskier, as the value of it can fluctuate a lot depending on market changes. However, if you purchase land before a major infrastructure takes place, the returns can be significant. It’s important to find out all you can about government and state plans for infrastructure. You can also buy land that already has property on it, and either look into a renovation or a complete replacement of the buildings altogether.
OK, so there you have it – a basic guide to the types of property you can invest in. Let us know your thoughts in the comments section below.